| Welcome to your morning markets update, delivered every weekday before the European open. Good morning. Iran retaliated for the U.S. airstrike, Samsung's earnings beat expectations and we await a press conference from Carlos Ghosn. Here's what's moving markets. Retaliation The retaliation begins. Iran hit U.S. military bases in Iraq with missiles, a direct attack on U.S. forces in the region that will risk a further escalation from President Donald Trump. The news, as the airstrike that kicked off the tensions last week had done, sent investors into safe-haven assets and caused U.S. equity futures and Asian stocks to swing wildly on Wednesday. Adding to the jitters, a Boeing 737 jet crashed in Iran shortly after takeoff on Wednesday, killing all passengers and crew on board. There's no indication so far that it's linked to the wider picture, but that's unlikely to prevent it from creating more nerves. What to Do The gold price topped $1,600 per ounce following the attacks on the military bases and the new developments are likely to send investors back to the drawing board as they continue to game out all the potential scenarios that may evolve. So far, market participants have taken a range of moves as they reassess the geopolitical risks facing their portfolios, including making short-term bets to taking out hedges to protect against price movements to retreating to the sidelines to wait it out. Samsung Beats Korean giant Samsung Electronics Co.'s profit topped expectations for the December quarter, adding to the increasingly brighter underlying picture for the chip sector following decent results from the U.S.'s Microchip Technology Inc. on Monday. Samsung's beat was driven by memory chip prices starting to recover from the recent downturn and this appears to be happening faster than the market had previously anticipated. The tensions around Iran may weigh on European technology stocks on Wednesday, but the fundamentals for the industry are getting better. Ghosn Speaks The world's most famous white-collar fugitive, Carlos Ghosn, plans a press conference in Beirut on Wednesday at 3 p.m. local time at which he's expected to hit back at Nissan Motor Co., the Japanese automaker that ousted him after his arrest in Japan. He's expected to name people behind what he says was a plot to halt his plans to integrate Nissan more closely with France's Renault SA, but according to people familiar with the situation, the Japanese group intends to go on the offensive to head off the attacks. Whatever happens, eyes will be glued on Ghosn once more after his dramatic flight to Lebanon over the new year holiday. Coming Up… Asian stocks pared losses and European stock futures are pointing firmly lower as markets try to decipher what's next in the U.S.-Iran situation. Oil initially jumped on the attacks but has come off the intraday highs. German factory orders will top the agenda for economic data while on the earnings front we'll get more on how British grocers fared over the festive season from J Sainsbury Plc, plus an update from the country's top vegan sausage roll merchant, Greggs Plc. What We've Been Reading This is what's caught our eye over the past 24 hours. And finally, here's what Cormac Mullen is interested in this morning A pattern is emerging in markets in response to the steadily escalating tensions between the U.S. and Iran in the Middle East. An initial sell-off on strikes or strong rhetoric by one side or the other is reasonably quickly pared after traders judge either a further escalation is unlikely or that it won't impact the bullish narrative that gave risk assets a stellar performance in 2019. On Wednesday we saw the Iranian response to the killing of General Qassem Soleimani — airstrikes on Iraqi bases — now markets are awaiting the turn of the U.S. As was the case before, moves in financial assets were sudden but not overly severe. It must be remembered that all through last year's gains, investors were selling out of stocks, so equity positioning is unlikely to be at extreme levels. And even though short volatility bets are high, hedge funds had already been dialing back on their conviction that a risk-on market mood would keep price swings contained. Speculative net-short positions in futures linked to the Cboe Volatility Index finished 2019 about 30% below November's record levels, the latest weekly Commodity Futures Trading Commission data show — reducing the likelihood of a short squeeze. Investors seem content to buy the risk-asset dips for now, but remain in wait-and-see mode with the potential for further geopolitical tension ahead.  Cormac Mullen is a cross-asset reporter and editor for Bloomberg News in Tokyo. (Correction: The Jan. 7 edition of this newsletter stated the U.K. budget is scheduled for March 15. It is scheduled for March 11.) Like Bloomberg's Five Things? Subscribe for unlimited access to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. Before it's here, it's on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can't find anywhere else. Learn more. | 
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